CITY stockbroker Merchant Securities saw its shares leap almost 27 per cent yesterday as it said it had agreed an all cash takeover offer from South African investment group Sanlam.
Sanlam, Merchant Securities’ biggest shareholder with almost a ten per cent stake, will pay £12.25m to take its shareholding to 75 per cent through a 22p per share cash offer.
The deal gives Sanlam a foothold in corporate broking but also access to Merchant Securities’ private client wealth management business.
Investors welcomed the news, sending its shares up to 21.5p, while Merchant’s founder and chairman John East said the offer would give shareholders an exit opportunity.
“We are pleased to have agreed this offer with Sanlam. The offer price represents a significant premium to both the current and recent market prices and enables shareholders to realise their investment for cash,” East said in a statement.
In a separate email, Merchant’s research team said it was also “very excited by the transaction”.
The offer is being administered through Bidco, a new Sanlam subsidiary created for the takeover. The combined group will be led by Daniel Kriel, chief executive of Sanlam Private Investments, and Merchant’s management will hold the remaining 25 per cent of the group’s equity.
The takeover is the second of a City broker by a South African finance group in the past two months, after Evolution Group sealed its sale to Investec for £211m this month.
Aim-listed Merchant Securities fell to a £4.6m loss in 2008 as the recession bit into its revenues, but returned to profitability in the year to March 2010 and turned a £1.1m profit in the past year on revenues of £8.4m.
MEET THE ADVISER
PHILIP Secrett, partner in the capital markets practice at Grant Thornton, has been leading the team advising Merchant Securities on its takeover by Sanlam.
A chartered accountant and Aim specialist, Secrett has spent 12 years bringing smaller companies to market and chairs the London Stock Exchange’s Aim advisory group.
Secrett was appointed Merchant Securities’ nominated adviser only in May this year, but has been working for another of the City’s independent brokers, Panmure Gordon, for several years. In another new client win, he was appointed adviser to Manganese Bronze, the maker of London black taxis, in October.
Secrett also represents several listed investment funds, such as real estate investor Dolphin Capital, China-focused private equity firm ARC Capital, and Pacific Alliance, which runs several Asia-focused funds, on their acquisitions, disposals, and share and bond issues.